Archive for the ‘american colonialism’ Tag

Exempting Puerto Rico from Jones Act   3 comments

Alaskans know all about the Jones Act and fully sympathize with Puerto Rico on this issue. It’s a sign of our colonial relationships with the United States that Alaska, Hawaii and PR are forced to pay (on average) 30% more for goods because of the Jones Act requirement that even foreign goods be shipped on US-flagged ships. It strangles our economy here in Alaska, apparently PR feels it is harming their economy and I know people in Hawaii who say the same thing for them. Puerto Rico has greater problems tied to really stupid debt practices, but the Jones Act is part of the problem … a piece of the puzzle for fixing their woes.

http://www.pbs.org/newshour/making-sense/jones-act-holding-puerto-rico-back-debt-crisis/

Congress is considering suspending the Jones Act for Puerto Rico and I applaud. However …

HOWEVER, the Jones Act should be suspended for Alaska and Hawaii as well and Congress had better not play favorites with Puerto Rico while allowing the two actual states of the union to continue to suffer. But … I’m almost willing to lay down grocery money on this … I predict that if (and it’s a big “if”) Congress does repeal the Jones Act it will be only for PR and possibly Hawaii. Watch. Alaska is considered “special”. This is because the federal government believes the resources that rightfully belong to Alaskans should enrich those in the Lower 48 more than Alaskans. Evidence of our colonial relationship with the United States of Tyranny.

http://economics21.org/html/help-puerto-rico-repealing-jones-act-1403.html

http://www.joc.com/maritime-news/container-lines/bill-would-exempt-puerto-rico-jones-act-ignites-old-battles_20160608.html

So while I’m on Puerto Rico’s side in this debate, I insist that Alaska and Hawaii be included and suggest all three governments should join to fight for repeal.

Trouble for the Empire   Leave a comment

America’s Imperial Overstretch

This week, SU-24 fighter-bombers buzzed a U.S. destroyer in the Baltic Sea. The Russian planes carried no missiles or bombs.

Message: What are you Americans doing here?

In the South China Sea, U.S. planes overfly, and U.S. warships sail inside, the territorial limits of islets claimed by Beijing.

In South Korea, U.S. forces conduct annual military exercises as warnings to a North Korea that is testing nuclear warheads and long-range missiles that can reach the United States.

U.S. warships based in Bahrain confront Iranian subs and missile boats in the Gulf. In January, a U.S. Navy skiff ran aground on an Iranian island. Iran let the 10 U.S. sailors go within 24 hours.

But bellicose demands for U.S. retaliation had already begun.

 

Source: Trouble for the Empire

Gov. Walker: Enough is enough on ANWR – Fairbanks Daily News-Miner: Community Perspectives   Leave a comment

Gov. Walker: Enough is enough on ANWR – Fairbanks Daily News-Miner: Community Perspectives.

Gas Prices in Alaska – Still Getting Pump Shock!   Leave a comment

Abigail Jack pumps gasoline into her vehicle at Safeway on Thursday. Oil prices have dropped 39 percent since June.  Michael Penn | Juneau EmpireAnd the beat goes on in America’s frozen petroleum colony.

Gas prices are dropping with oil prices – sort of | Juneau Empire – Alaska’s Capital City Online Newspaper.

Posted December 5, 2014 by aurorawatcherak in Alaska

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De-Mything Alaska’s Oil Taxes Part 1   Leave a comment

In February 2012, on the cusp of the Alaska Legislature passing SB21, Amanda Coyne and Alex DeMarban, both of the Alaska Dispatch News, ran a series of articles de-mything the claims the oil industry was spreading at the time. Most of what I am writing here is drawn from their articles. These issues are still relevant because Alaskans go to the polls this month to decide the fate of SB21. If we vote “yes” on Proposition 1, SB21 goes away and we revert back to the ACES taxation structure of the Palin era. If we vote “No” on Prop 1 (as the massive oil industry advertising campaign wants us to), we go forward with SB21 and bankrupt the state in about eight years.

That’s according to the Parnell administration’s own estimations, but not to worry, the oil companies have promised us that they will open up new development that will fill our coffers once more. There is no formal contract on that, but they promise …

 

Myth-busting claims in Alaska’s oil tax debate: Part 1

The Vote No on 1 Coalition argues that Alaska's old tax structure made it less competitive than other oil producing areas in the US and around the world.SB21 lowers taxes on the oil industry in Alaska by about $2 billion a year. That’s a lot of money. Alaskans own the resource. We are the equivalent of a landowner in North Dakota or Texas who leases their land to the oil companies for drilling. The only difference is that we do it through the State of Alaska. In this instance, the State is a land-holding corporation and the residents are the shareholders. As good shareholders, we should understand the issues, but unfortunately, we act more like voters who can be swayed by advertisements.

For the record, anytime an ad campaign floods the airwaves to the point that they shout down the opposition, I get suspicious. The Vote No crowd had me for a while, but then they started sounding desperate and every ad ends with the disclaimed “Major contributers — BP, Exxona nd Conoco Phillips.

Vote Yes - Repeal The GiveawayYeah, I felt manipulated and I had to go out of find out why.

Governor Parnell claims that SB21 will eventually result in an increase of a million barrels of oil down the pipeline. Maybe. There has been an uptick in development this year, but of course, given that it can take years to negotiate a deal on a jack-up rig and clear the environmental hurdles to use it, the chances that this new (barely discernable) increased development is the result of SB21 coming into effect last July — doubtful. There’s no contractual obligation for the oil companies to increase development. There could be — but there isn’t. There’s no guarantee that lower taxes mean more oil. Sean Parnell used to work for Conoco Phillips and will likely work for them again. Suspicious?

In the run up to SB21 and since (the controversy never waned), I’ve seen a lot of charts, grafts, etc. and frankly, even as an informed shareholder, I’m confused. What the heck is a marginal tax rate versus effective rate? Progressivity? Proven reserves? Gross versus profit I understand, but tariff and transportation costs? Okay, I’m dizzy.

The fact is that the idea that lower taxes automatically equals higher production is pure conjecture.

Oil is the lifeblood of the Alaskan economy. Maybe we could diversify, but we haven’t, so let’s be honest that the oil companies have made Alaska as we know it. Libraries, paved roads, and box stores are all largely due to oil. That doesn’t mean we should believe everything the oil companies tell us. We should be fact-checking the propaganda.

Which is what the Alaska Dispatch News did in 2012.

Myth 1: Oil companies are trustworthy business partners.

Sometimes they are, but Exxon fought the fishermen of Prince William Sound for two decades over the Exxon Valdez oil spill. Then there was that corruption scandal in the Alaska Legislature in 2006 that led to the conviction of several lawmakers on bribery charges.

Conoco Phillips, on the website Make Alaska Competitive, said Alaska has the “highest cost structure” of ConocoPhillips’ investments, but in 2011, company officials told analysts that Alaska has “higher-than-average margins”. Which is it? It’s either one or the other, it can’t be both.

Alaska’s constitution requires that Alaska’s resources be managed for the “maximum benefit of its people.”

Alaska v. Amarada Hess was a court case which found that from 1977 to 1992 companies were guilty of “deliberate falsification in computing the price paid to Alaska for its royalty oil” The judge concluded that the State of Alaska was guilty of “inexcusable trustfulness in dealing with the oil companies.”

Trustworthy partners? Well, maybe in the same way that my husky-mix is trustworthy to always find trouble when my back in turned.

Myth 2: Alaska oil companies are taxed 80 to 90 percent.

Anchorage Daily News columnist Paul Jenkins wrote that “Because of ACES, Alaska boasts among the highest marginal tax rates in the world, topping 90 percent when oil prices are high.” This statement can also be found on the Make Alaska Competitive website. It’s misleading.

Under ACES Alaska’s tax rate was not 80-90 percent. Russia, Algeria, Angola and private lands in Texas and Louisiana have a tax rate that high, but Alaska’s tax regime under ACES doesn’t even come close to those. On a $100 barrel of oil, Alaska taxed the oil company about $40 (or 40%).

This is where the marginal tax rate comes in. As income rises, so does the tax rate. So if the price of oil increases to outlandish amounts (hard to believe we now think of $100 a barrel as normal), the tax rate goes up, but we’re not there yet. The effective tax rate is really what’s important, but you don’t hear about that in the Alaska tax reform debates. Alaska taxes on profit and allows a hefty write-off — about $27 dollars a barrel under ACES, for what they pay to produce and transport oil. (ConocoPhillips actually claims it’s about $15, which brings up that question of trustworthiness again). So a 53% tax rate is levied on about $73 for a $100 barrel of oil. The oil companies keep $22.50, the federal government takes about $12.50 and the state gets about $39 from all taxes and royalties included.

Alaska’s Colonial Tax History   Leave a comment

GC-2I’ve said before that Alaska is a colony in all ways except the federals call us a state. Statehood changed nothing. We are as beholden to the federal government and the large resource extraction corporations as we ever were … not because we’re required to be by law any longer, but because we’ve been an abused colony for so long, we don’t know how to act like an owner state.

Alaska is about to vote on oil tax reform in two weeks and it’s important for us to understand why. So I’m going to look at some history of Alaska oil taxation, because I believe we are still suffering from abused colony syndrome and we need an intervention.

Prior to Prudhoe Bay, Alaska taxed on a well basis.

  • First 300 barrels per day taxed at 5% of gross value  or 17 cents a barrel).
  • Next 700 barrels per day taxed at 6% of gross value  or 20 cents a barrel.
  • Anything over 1000 barrels per day taxed at 8% of gross value or 27 cents a barrel.

Note that if a well didn’t produce that day, they were still taxed on the gross value of the well.

Alaska has operated under five tax regimes since production on the North Slope began.

Economic Limit Fact (“ELF) 1 (1977-1989)

The theory was that there is an economic limit where the cost of producing a barrel of oil exceeds revenue. When a field is at its economic limit, the burden of the tax should not cause the field to shut down. Scale down production taxes as production declines toward economic limit so tax is zero at the economic limit.

The original proposal was that company should not pay tax on the barrels that generate the revenue to cover operating costs at economic limit. Each well got 300 barrels per day tax-free to cover operating costs at the economic limit.

ELF 1 applies to a nominal tax rate of 12.25% of gross for the first five years of a field, then 15% of gross thereafter.

The problems with ELF 1 were that 300 barrels was an arbitrary choice as far as revenue to cover operating costs, drilling wells reduces the tax rate and field decline reduce the tax rate as well.

The Alaskan colony bowed before its corporate masters and licked their boots.

Then came a catastrophe. OPEC decided they wanted to corner the market in oil, so they dropped their prices to almost nothing in 1986. At $9 a barrel, the State of Alaska’s royalty share of oil wasn’t meeting the needs of the state. The oil companies were disincentivized to produce because of the low per-barrel prices, so production was declining and that meant revenues from ELF were declining.

ELF II (1989-2006) came in to correct the problems, but it really was an oil industry giveaway. It was meant to spur production in Prudhoe Bay, so the oil companies moved into satellite fields to avoid having to pay a bit higher taxes in Prudhoe. Field size declined, well production continued to decline and the tax rate declined regardless of price.

In 2005, the State of Alaska decided to aggregate Prudhoe Bay and the satellite fields because we saw them all as the North Slope, not as separate fields. They were interdependent upon one another, sharing common facilities, for example.

When oil was discovered in Prudhoe Bay in 1968, the oil companies also found an estimated 26 trillion cubic feet of natural gas, which is more gas than the entire United States consumes in a year. There was actually more discussion of building a gas line in the early days of North Slope development than there was discussion of oil development. Then, for a variety of reasons, primarily discoveries of significant amounts of natural gas in the Lower 48, the gas line idea was tabled after the Trans-Alaska Pipeline was built. In the early 2000s, the price of natural gas began to rise and the 2001 National Energy Plan recommended an expedited construction of an Alaska natural gas pipeline to the Lower 48. In 2004, Congress passed the Alaska Natural Gas Pipeline Act that was meant to put us on the fast-track to a pipeline In 2006, 16 federal agencies with roles and responsibilities related to the pipeline signed a memorandum of understanding (MOA)  to establish a framework of cooperation on the project management.

Every Alaska governor since completion of the TAPS has tried to spur construction of a natural gas pipeline. In 1998, the Alaska Legislature passed the Alaska Stranded Gas Development Act to encourage North Slope producers to bring the natural gas to market by allow the state and producers to negotiate tax, royalty and other fiscal terms for a liquified natural gas export project. A new version in 2003 applied to any North Slope gas project. Under the new law, the State was not authorized to provide fiscal stability to the oil producers. Then-governor Frank Murkowski negotiated a new oil tax system and sought to amend SGDA. The Legislature took the negotiated product as a starting point for amending the severance tax statute. The oil industry began bribing Alaska legislators to vote their way. That led to several convictions of fraud and the eventual election of Mark Begich, but it also led to an interim taxation ttructure called Petroleum Profits Tax (PPT).

PPT (2006-2007) deducted all costs of production before applying a base rate of 22.5% of net value. There was a progressivity element to the taxation when net value per barrel exceeded $40 a barrel.

At $90 a barrel, net value was $61 a barrel, which would result in a 7.75% progressivity rate. Total tax rate on a $90 barrel of oil would be $16.93 a barrel.

The problem was that the costs always seemed to be higher than estimated, which made revenues lower than expected. What can you expect from a law that was written by legislators who, if they were not taking bribes themselves, knew their fellow legislators were accused of taking bribes? Thus the law only was in place for two years.

The bribery scandal and Murkowski’s clear favoritism of the oil industry resulted in the election of Sarah Palin who had been one of the first to point out the wide-spread corruption in the Murkowski administration when she was on the Oil and Gas Development Authority board. The Alaska’s Clear and Equitable Share (ACES) tax structure was really her brain child.

ACES provided a 25% base rate of net value after deducting all costs. For the first time, Alaska was drawing on the example of other oil-producing countries like Iraq, who “pay” the producers a base rate for the production of the oil, but then charge a tax on what is produced. ACES also had a progressivity element when net value per barrel exceeded $30 a barrel. Again, we took our example from elsewhere.

At $90 a barrel, net value was $61 a barrel, progressivity was 12.4%, total tax rate was $37.4% for a tax of $22.81 per $90 barrel of oil.

That’s an increase of about 25% over PPT and about 50% over ELF, but it is on-par with tax regimes in the Middle East and far below what is charged by countries like Russia.

ACES offered credits for production:

  • Capital credit of 20%
  • Well lease expenditure credit (excl. North Slope) of 40%
  • Exploration credit of 20-40% (depending on location) **Expires 2016***
  • Small company credit of $12 million if sufficient offsetting income – **expires 2016***

Alaska made a lot of revenue off ACES. During that same time period Conoco Phillips (the only American company producing on the North Slope and thus the only one required to publicize its PL report) reported record earnings after taxes and Prudhoe was its highest grossing field WORLDWIDE.

Now if Conoco Phillips was doing so well under ACES, how do you suppose BP and Exxon were doing?

  5 comments

Want to know what the EPA manipulation of the Pebble Mine permitting process has cost Alaska?

The Alaska Dispatch News ran a great article this weekend on it.

A year after Pebble, Iliamna Lake communities adjust to a new normal

Essentially, it’s gutted the economy of the area and left people who aren’t set netters or trawlers without any future.

Way to go, EPA and the Greenpeace-funded Bristol Bay Forever crowd.

State of Alaska — what are you going to do about it?

 

 

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